UNDER NEW MANAGEMENT; Business Revolutionaries Learn Diplomacy's Value

By WILLIAM C. TAYLOR

Published: July 16, 2006

MICHAEL L. CHASEN is a young entrepreneur with a fast-moving start-up, a highflying stock, and far-reaching growth plans. His company, Blackboard Inc., sells software that enables colleges and universities to put all their essential activities online: course reading, homework assignments, class discussions, tests and lab projects.

Blackboard's software, now used by well over 10 million students and their professors, has all the earmarks of a ''disruptive technology'' -- a blend of computing and Internet-based connectivity with the potential to transform how established institutions operate.

Yet Mr. Chasen, the company's president and chief executive, will never be confused with the brash upstarts that defined the Internet boom of the 1990's, or Silicon Valley's ever-growing crop of disruption-crazed entrepreneurs.

There's something undeniably romantic about start-ups that champion radical business models designed to change the world. But business revolutions tend to end the way political revolutions do -- badly and bloodily, with carnage everywhere.

Many a hard-charging start-up has taken aim at old-line industries but has wound up shut down (Webvan, for example), bought out (Napster) or chronically losing money (TiVo).

Mr. Chasen was determined to build a company that would endure, which is why, despite Blackboard's huge ambitions, he and his colleagues have relied on a conservative strategy and style. They may be disruptors, but they conduct themselves like diplomats.

''How long have people been predicting that higher education was going to experience fundamental change or fall apart?'' Mr. Chasen asked during an interview at his company's headquarters in Washington. ''But we are teaching and learning in much the same way we have for centuries. We don't aim to 'replace' the classroom. We're not looking to 'revolutionize' education. We help schools deliver more effectively what they are good at already.''

There is no question that business has been good for Blackboard. The company, which introduced its first product in 1998, is on track to generate sales of more than $170 million in 2006, up from $93 million in 2003. Blackboard went public at $14 a share in June 2004 and its stock price has doubled, giving it a market value of $800 million.

What's striking about these results is that they have emerged from such a button-downed strategy.

At the height of the first Internet boom, Mr. Chasen recalls, he and his co-founder, Matthew Serbin Pittinsky, Blackboard's chairman, were under pressure to stop charging for their software -- a formula for rapid (if money-losing) growth. They resisted, unlike many of their free-spirited rivals, most of whom were wiped out in the dot-com crash.

''We thought we had created something of value, and we wanted to charge for it,'' Mr. Chasen said. ''Besides, we couldn't figure out how to make money with 'free.' No matter how many zeroes we put into the spreadsheet, it all added up to zero.''

Even the company's name sends a reassuring message. Most of its current rivals -- companies like eCollege.com, Desire2Learn, and Jenzabar -- have identities that underscore their roots in the Internet era. Not so Mr. Chasen's outfit. ''A blackboard is one of the oldest platforms for teaching and learning,'' he said. ''We never presented ourselves as a 'disruptive' technology. Of course, if you look back on our impact, there's no question that Blackboard has been a disruptive force.''

Michael McCue, a co-founder and the C.E.O. of Tellme Networks, has also come to appreciate that the most effective way to champion a disruptive technology is to recognize the virtues of diplomacy. His company, based in Mountain View, Calif., is a classic Silicon Valley story.

Neither he nor the other co-founder, Angus Davis, graduated from college. Yet they raised $250 million in venture capital to pursue a business plan named DialTone 2.0 -- marrying telephones and the Internet to reshape how companies communicate with their customers and how individuals get information. (For example, E*Trade Financial uses Tellme to automate telephone requests for stock quotations, while Cingular Wireless uses Tellme for much of its ''411'' directory-assistance service.)

The company, with annual revenue of more than $100 million, already handles two billion calls a year, up from roughly 800 million in 2004. ''We have a technology that is as disruptive as anything could be to the telecommunications industry,'' Mr. McCue said. ''We're trying to open up what has always been a closed network. We have a lot of ambition.''

But its ambition does not inspire brash rhetoric or reckless business plans. ''Being a disruptor is like running with nitroglycerin,'' he said. ''Sometimes you can go fast, but you'd better know when to slow down.''

He speaks from experience. Back in the 90's, Mr. McCue was vice president for technology at Netscape Communications, the ultimate symbol of disruptive competition. He watched as Netscape grew dramatically, brazenly challenged Microsoft's hold on the computer business and experienced a devastating counterattack.